Starting (January 31st, 2023) loan apps operating on the Google Play platform targeting users of Android devices, have to contend with some new requirements. These are measures put in place by Google to make sure that they are dealing with legal entities in Kenya that have the capacity to handle the necessary data involved, properly.
On top of that, last year, the Central Bank of Kenya
required all unregulated digital credit providers in the country to register
with it by mid-September.
Subsequently, the Central Bank of Kenya went ahead and made
public a list of the digital credit providers whose applications it approved, a
paltry 10 of the 288 applications received.
An updated to its directory of digital credit providers, many of whom operate via the infamous loan apps as well as short codes (USSD), shows steady growth since then to more than double. As of today, January 30th, 2023, these are the approved digital credit providers in Kenya:
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Notable inclusions in the list above include M-Kopa, which
offers various loans including the (in)famous Kshs 60 per day
smartphone. There is also Tala and Jumo Kenya. The latter is the company
that former IT, Youth and Innovation Cabinet Secretary Joe Mucheru has joined as the president.
It is worth noting that Branch, a popular digital credit
provider, is missing from this list because it transitioned to a bank and banks
are already regulated by the Central Bank of Kenya.
Without the approval of the Central Bank of Kenya and
listing on its directory, a digital credit provider cannot be approved by
Google to have their app listed on the Play Store.
The regulations in force help to deal with issues that had
arisen from the usage of digital loan products including the invasion of
privacy where apps would raid borrower’s contact lists, upload them to their
servers and use them to coerce them and their contacts to pay back the loans in
the event of non-performance of the said loans. The other issue was predatory
lending practices that have seen Kenyans suffer from very high interest loans
that they have become enslaved to.
1. BACKGROUND
On 18th March 2022, the Central Bank of
Kenya vide Legal Notice No. 46 operationalized the Central
Bank of Kenya (Digital Credit Providers) Regulations, 2022 [hereafter
“the Regulations”]. This was done in fulfillment of the Central Bank’s mandate
over Digital Credit Providers [hereafter “DCP”] as granted by the Central
Bank of Kenya (Amendment) Act, 2021.
2. PURPOSE
The Regulations came into force at a time that the public
had raised serious concerns about the fast-growing digital lending industry
operating through apps installed on mobile phones and computers. The
Regulations provide for the licensing, operations, and compliance requirements
of Digital Credit Providers in Kenya. Having such Regulations offers a sense of
security and protection to the target clientele of the DCPs.
The Regulations only apply to entities carrying out digital
lending services through digital channels such as computers, mobile phones, the
internet and apps. It is important to note that the Regulations do not apply to
deposit-taking institutions such as Saccos, Banks and Microfinance
Institutions.
3. OVERVIEW
In accordance with the Regulations, Digital Credit Providers
are required to obtain a license from the Central Bank of Kenya before offering
digital credit services. In situations where, the DCP had already begun
operations prior to the operationalization of these Regulations, they are
required to apply for a license from the CBK within a period of 6 months from
the date the Regulations were published. It is noteworthy that the license
issued by the CBK is renewable on annual basis by the 31st day
of December. The current annual fee is capped at Kenya Shillings Twenty
Thousand (KES. 20,000).
As the regulator of the DCPs, the CBK has the power to
revoke or suspend a license based on the following reasons:
- Where
the DCP violates the licensing conditions.
- Where
the DCP fails to renew the license.
- Where
the DCP gives false information when applying for the license.
- Where
the DCP violates anti-money laundering laws.
- Where
the DCP ceases to carry out the business of a Digital Credit Provider.
The Regulations also seek to protect consumers from
harassment by prohibiting DCPs from aengaging in uncouth conduct such as use of
violence or threats or profane language, making unsolicited and unauthorized
phone calls or sending messages to a customer’s contacts, employing
unconscionable debt collection tactics or act in any manner whose outcome is to
abuse, oppress or harass the customer during debt collection.
The onus has now been placed on DCPs to carry out due
diligence on a customer’s ability to repay the credit facility before advancing
the same to the customer. Further to that, the DCPs have the responsibility of
putting in place a complaints redress mechanism for customers. The same should
be brought to the attention of the customers.
DCPs are also required to use systems that are reliable and
secure in the sense that they guarantee the safety, confidentiality, and
integrity of customers’ information.
4. LICENSED DIGITAL CREDIT PROVIDERS
On 31st January 2023, the CBK did a press
release and confirmed that it had only approved ten Digital Credit Providers
out of the 288 applications it had received since March 2022. Some of the
licensed Digital Credit Providers include but are not limited to:
- Zanifu
Limited
- Umoja
Fanisi Limited
- Tenakata
Enterprises Limited
- Sokohela
Limited
- Sevi
Innovation Limited
- Rewot
Ciro Limited
- Ngao
Credit Limited
- Natal
Tech Company Limited
- MyWagePay
Limited
- MyCredit
Limited
- Mwanzo
Credit Limited
- M-Kopa
Loan Kenya Limited
- MFS
Technologies Limited
- Letshego
Kenya Limited
- Jumo
Kenya Limited
- Inventure
Mobile Limited (Tala)
- Kweli
Smart Solutions Limited
- Jijenge
Credit Limited
- Giando
Africa Limited (Flash Credit Africa)
- Getcash
Capital Limited
- Ceres
Tech Limited
This number is bound to increase gradually since other
Digital Credit Providers are at different stages in the license application
process.
5. CONCLUSION
By putting in place the Regulations, the CBK has given DCPs the responsibility of establishing internal policies and procedures that will complement the Regulations and foster a healthy business environment in the industry. These policies include but are not limited to Code of Ethics, Consumer Redress Mechanisms, Data Protection Mechanisms and Anti Money Laundering Policies.
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